‘Wait and See’: Feasibility Roadblocks Drive Extensions Up

“We must use time as a tool, not as a couch,” US President John F. Kennedy said. Queensland’s developers appear to be taking that to heart. During the pandemic, automatic extensions to currency periods were introduced via the Planning Act 2016 and provided much-needed relief for developers. But the culture of extensions has continued, according to planners. “We’ve already seen a significant increase during the past five years with timeframes from application to completion going from four, four-and-a-half years to six or seven years,” Urbis director and economist Paul Riga says. This is pushing currency period limits, with a material change-of-use application generally given six years for the first change of use until work gets under way. “There is a consensus in our planning team that there are a growing number of developers coming forward and looking at extensions,” Riga says. While time is of the essence in a housing crisis, extensions are not necessarily a case of developers resting on their laurels; rather, the extra time is being used to secure reliable builders, amend and modify developments to suit the changing needs of target demographics—especially after acquiring a DA-approved site, and to respond to the changing planning policies of the state. The ‘wait and see’ approach Given the state of the construction and development markets currently, it’s no surprise that developers are requiring more time to rebalance their developments. According to Doyen Town Planning managing director Rhys Trombetta, one of the primary reasons to apply for an extension is the skyrocketing cost of development. “With construction expenses increasing over the past few years, many clients find their projects no longer financially viable,” Trombetta says. “Factors like supply chain disruptions, material, and contractor, shortages, and increased labour costs have driven budgets beyond their original forecasts. “Though costs are starting to level out, clients are understandably cautious. Rather than moving forward amidst lingering uncertainty, many are choosing to pause their developments and wait for the economy to stabilise. “This ‘wait and see’ approach gives them time to reassess as market conditions improve.” ▲ A render of the 1100-apartment project approved for the 5700sq m site Andrews Projects acquired at Surfers Paradise. The State Government has signalled its intentions to be more lenient with currency periods, and has enshrined the concept of an ‘applicable event’ into its policies. Its last applicable events were tropical cyclones Kirrily and Jasper of February this year. They are unlikely to be the last, given the forecasts for wild weather ahead in the coming summer. And thankfully, councils are relatively amenable to such requests. Urbis director of planning Sophie Lam said that in their experience, “councils, and in particular Brisbane City Council, understand the current difficulties facing developers in proceeding to construction and so have been very supportive of granting approvals to extension requests”. Changing demographics, ownership Major construction challenges are also forcing DA-approved sites to either change, or change hands. “It will of course depend on the reason for the extension,” Riga says. “Ultimately if the developer is struggling to find or approve a builder, that’s a crucial element to a project progressing. Others are more design-focused tweaks, meeting the market and ensuring there is an appropriate product that’s going to be absorbed and be as attractive as possible.” Reworking schemes has been standard practice in the past 12 months to adapt to the changing times and feasibilities facing development, and also as investors and developers reassess their portfolios. ▲ Gold Coast developer Brian Heran wants to increase the height of his planned Ovation tower on the Gold Coast for the project to remain feasible. Last month, for instance, a Surfers Paradise site earmarked for the $1.2-billion China-backed Orion Towers project was downsized after seven years of inactivity into a $700-million, twin 37-storey highrise project by Gold Coast developer Andrews Projects—highlighting the need for local expertise to make projects work. “For projects and clients we are working with, a number are looking at the variety and diversity of products within their developments and what they look like,” Riga says. “That means not just delivering a large three-bed premium-end product, they’re looking at how they can fit a variety of two and one-bedroom units in to be attractive to and expand the purchaser and target market, and in that sense attracting a broader buyer profile on that basis. “Not a lot of those projects have been launched yet but we are seeing them in the pre-planning phase.” Amenity is key, as is the fundamental housing model, Lam says. “Changes to approvals to align with contemporary requirements include changes to alter unit mix, changes to improve resident amenities such as introducing rooftop gardens, and even changes to some approvals to convert them from build-to-sell to build-to-rent typologies,” she says. ▲ Renders of the reworked Ovation tower at Main Beach. This was certainly the case for Gold Coast developer Brian Heran’s Ovation tower at Main Beach—the developer has asked to upscale from 20 to 32 storeys to ensure the project remained feasible. It is also behind the expansion of Aurum Capital Group’s Chevron Island project, which added 30 apartments and seven storeys “in order to meet market demand and provide additional housing opportunities to the local area”. These changes are also being made with an eye on development timelines, Lam says. “Some developers are acquiring sites with existing approvals which are already halfway through the currency period, so it is necessary to extend to cater for prolonged construction timeframes given productivity challenges being experienced.” Queensland policy changes The motivations between these changes and extension to DA-approved sites and their currency periods can be a trend seen across the nation, but there are some Queensland-specific hurdles, Trombetta says. “Another key factor is the pending adoption of new city plans,” he says. “Clients with existing approvals—especially those granted a few years ago—are now holding off, anticipating that these new plans may unlock greater development potential. “For example, we’re currently working on an extension for a site at Bellbird Park where, under the drafted Ipswich City Plan, an approved subdivision could yield an additional two to three lots, so from four lots to six or seven. “Until the plan is formally adopted, there’s an element of uncertainty, and extending the current approval gives clients a safety net in case any unforeseen changes to the draft plan reduce the site’s potential.” ▲ A render of the approved 25-storey Swan on Chevron residential tower. Lam says that new precinct plans from councils and anticipated policy changes to improve housing supply, including reducing carparking requirements in inner-city areas, are also leading developers to hold back in the short term. “Once adopted, we expect many developers and in particular build-to-rent proponents to seek to change their approvals further to reduce parking supply to better align with tenant needs, given carshare arrangements and the like, and also improve project viability. “This will likely necessitate further extensions to those approvals also to ensure sufficient currency periods to complete construction.” While projects are taking longer to come out of the ground, it’s also about getting proposals that are on a knife’s edge over feasibilities under way. “Ultimately, developers want to sell their product as quickly as possible and maximise the price they can get, so there needs to be a greater consideration of who their market is now.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. 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‘Wait and See’: Feasibility Roadblocks Drive Extensions Up

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